B.C. Surface Rights Board Reduces Rent Payable After Landowners Fail to Prove Loss

In the recent decision of the B.C. Surface Rights Board in Encana Corporation v Perry Burl Piper and Leslie Lancelot Dowd, the Board awarded compensation to landowners less than the amount previously offered by the operator. In doing so, the Board adopted the principles for landowner compensation under the Petroleum and Natural Gas Act articulated earlier this year by the B.C. Supreme Court in Progress Energy Canada Ltd v Salustro, 2014 BCSC 960. As discussed in a previous post, Progress clarified that the onus is on the landowner in a rent review hearing to adduce evidence of ongoing prospective loss.

In Encana, the landowners sought an increase in the amount of rent payable by Encana for surface access in relation to the operation of several gas wells and pipelines. Drawing from Progress, the Board maintained as follows:

• All rent reviews must, as a starting point, take into consideration the compensation factors outlined in the Act. Compensation should be awarded according to the loss or damage attributable to an operator's use of the land and cannot be evaluated simply on a per acre basis.
• Board decisions must be made in light of evidence demonstrating actual or reasonably foreseeable loss or damage suffered by a landowner for any adverse effects brought about by occupation of the land. The obligation is on the applicant seeking review to tender such evidence.
• The Board operates in an administrative review context governed by the Administrative Tribunals Act. A Board decision may be set aside if there is insufficient evidence to support it.

After undertaking an analysis of the compensation factors listed in the Act, including comparable Encana leases, the Board found that the landowners were in fact being overcompensated. As a result, the Board awarded compensation less than that offered by Encana and ordered the landowners to remit the amount of the resulting overpayment to Encana. The Board explained that it was constrained by statutory guidelines and that the landowners had failed to provide any relevant evidence that the Board could rely on in their favour.

Going forward, it can be expected that the Board will continue to endorse the principles set out in Progress to require an applicant for rent review to adduce evidence demonstrating the degree of loss or damage that the landowner will suffer according to the factors set out in the Act.

If you have any questions about the Encana or Progress decisions, and how they may affect you or your business, please contact Mike Theroux, Shawn Munro, Daron Naffin, or Laura Gill.

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